Frankfort, KY (September 20, 2004) Crit Luallen, Kentucky's Auditor of Public Accounts, today released a nearly 120-page examination of Kentucky state government's Procurement Card system and made over 100 recommendations to improve and strengthen the program. The system, known commonly as ProCard, was instituted in 1996 as a cost savings method of making small purchases without going through the cumbersome requisition procedure.
"Several significant weaknesses persisted throughout the ProCard program. These weaknesses subjected the program to needless risk - risks of fraud and abuse", Auditor Luallen said. "However, out of the 3,878 transactions reviewed only six instances of personal misuse were confirmed. These six instances totaled $245.41 and each was repaid within a month of the purchase."
The examination, performed by the Auditor's Office's Division of Examination and Information Technology, uncovered other, technical problems with the management of the ProCard system. The examination uncovered that over 820 transactions had insufficient documentation to determine whether the cardholder made the purchase, even though the purchases seemed appropriate. Over 260 ProCard transactions were not supported by adequate documentation, and over 50 split purchases were identified, which would have circumvented payment limits. In addition, there were 28 instances of ProCards not being canceled after a person left an agency. There was a lack of training for some ProCard administrators and there were no consequences for employees who failed to adhere to established policies.
Governor Fletcher requested the examination on March 22 after announcing several issues his administration had uncovered in its review of the program. Finance Secretary Robbie Rudolph has made several changes to the system. However, Auditor Luallen stated that the former controls and changes are only as good as those who apply them. "It is very important that when procedures exist to control a program they be followed. The procedures that were originally in place, and additional ones implemented by Secretary Rudolph, and those we are recommending today, will only work if they are consistently applied." she said.
Luallen also promised that her office would add ProCard expenditures to her list of ongoing audits of state government. "While ProCard review is not necessary to complete these audits, our auditors will add that component to what they are already doing," she added.
Ms. Luallen also reiterated her continued support of the goals and past achievements of the ProCard system and thanked the Governor for his continued commitment to making it successful. "I appreciate the ability to work with Secretary Rudolph and Governor Fletcher to make this good program even better. I am pleased both have committed to continuing this cost saving method of small purchasing and hope that we do not return to the days when it costs more to process some purchases than to actually buy the product." Luallen said.
Some of the recommendations made in the report were that the Finance Cabinet should seek more favorable rebate terms from banks, that they should ensure that payments are made in a timely fashion to avoid late fees, that each cardholder and agency should supply supporting documentation for every purchase, and that disciplinary action should be taken against those who consistently ignore the ProCard rules.
The 28 auditors working on the project under the direction of division director Brian Lykins were: Amy Bishop, James Bondurant, Veronica Bradley, Jennifer Curtis, Kevin Delvin, Amy Fisher, Stephen Fuller, Kelly Glines, Jennifer Harper, Mike Helton, Mary Ruth Hudson, Tony Hutchins, Jason Johnson, Jenny Luscher, Scott McKenzie, John Pitts, Lori Riddle, Sandra Rudic, James Ryan, Brooke Sinclair, Julie Skeeters, Brenda Starr, Karen Tucker, Cheryl Vaughn, Scott Vogt, Tiffany Welch, Alice Wilson, and Leslie Wilson.